Grim scenario for Hawaii's Obamacare plan: The numbers don't add up

As the Hawaii Legislature weighs bills that would make sweeping changes to the state’s Obamacare program, the interim director of Hawaii's healthcare exchange on Wednesday laid out a grim financial picture facing the agency.

With anemic enrollment by individuals and little interest among small-business employers, the state’s nonprofit exchange -- known as the Hawaii Health Connector -- is unlikely to have enough money to pay its bills, even under the best of circumstances, when federal grant money dries up in 2015.

The exchange had originally planned to stay afloat by collecting a 2% fee on every plan sold through the exchange, but with the slow pace of enrollment and changing federal rules -- delaying the employer mandate and allowing canceled plans to continue -- Interim Director Tom Matsuda said Wednesday that the math simply does not add up.

Last week, Matsuda and the Health Connector’s board members used expected enrollments by 2016, as well as the average premium costs, to calculate how much the exchange could collect by exacting its 2% fee on each plan.

“That revenue figure is far below what we think our expenses are going to be,” said Matsuda, who has estimated that the agency will need about $15 million a year starting in 2015. Health Connector board members also looked at the best-case scenario for enrollment, and “even then, we’re still short on having enough revenue to cover projected expenses,” he said.

Of the 100,000 uninsured in Hawaii, about half are expected to be eligible for Medicaid -- meaning just 50,000 people would buy individual plans through the Health Connector under the best-case scenario. And while Hawaii hoped to sell thousands of plans through the exchange’s small-business marketplace, Matsuda said so few small businesses are eligible for tax credits that officials are simply not seeing the demand. “What people can get on the Connector versus outside the Connector is the same, so there isn’t really a strong incentive for small employers to use the Connector,” he said.

Further complicating matters, only two insurers offer plans on Hawaii’s exchange, so many companies are continuing to rely on their longtime brokers (who, having essentially been cut out of the process, have no incentive to help Hawaiians buy plans on the exchange).

“This is not a problem of the operations,” Matsuda told lawmakers, who have been demanding more information about how the nonprofit has operated. “It’s a problem with the market not fitting exactly what the [Affordable Care Act] mandate is all about.”

Health Connector officials are pleading with officials at the federal government's Centers for Medicare and Medicaid for a waiver that would give them more time to spend the $205 million in federal grant funds that must be used or allocated by the end of the year.

That flexibility, Matsuda says, would allow the Health Connector to try to fix some of the technical problems that have stifled enrollments. One major source of the problems is a communication breakdown between the two systems that a consumer must navigate to get signed up for a health insurance plan. EveryHawaiian must get a denial of Medicaid eligibility through the state system -- built by one contractor -- before they can apply for tax credits to help buy a plan through the Health Connector’s system -- built by a second contractor.

Nearly 20,000 applications have been caught between the two systems.

If federal officials agreed to give the Health Connector more time to spend the grant money, Matsuda said, the agency could work on streamlining and integrating those two systems, among other things.

“We’re just going to assume right now that that’s not going to happen,” Matsuda said of the waiver, “but we’re just going to keep pushing to see if we can get a decision.”

As Hawaii healthcare officials try to find a solution for its financial problems, lawmakers are revising a series of bills intended to improve accountability for the Health Connector, which as a private nonprofit does not directly report to legislators.